The evolution to value-based payment is well underway as payers are increasingly tying reimbursement to the achievement of quality-related goals — everything from patient satisfaction scores to specific measures of quality and efficiency. In fact, it is estimated that 50 percent of physician compensation will be value-based in the next 10 years. 
Still, fee-for-service is slow to die. Most physician groups are operating with physician compensation plans that are based at least in part on production. For many, the emphasis remains on volume over value.
The challenge is for physician groups to at least begin adjusting their compensation methodology to include incentives for quality, outcomes and reduced costs. Here’s how:

Convene a Committee 

The first step is to convene a compensation committee that asks this critical question: “How do we remain economically viable in the future of value-based care?” The answer starts by evaluating current compensation, with an eye toward integrating value-based incentives into the plan. 
Here, it’s important to get representation from throughout the practice — a physician leader and other key physicians as well as practice administrators and outside consultants, such as your CPA. 

Determine Value Metrics and Incentives

Next determine how to gradually incorporate value metrics into the current compensation model. Consider the addition of just one quality metric now to the current compensation method. The goal is to create incentives that 1) make sense to the physicians, and 2) represent a fair measure of the value metric selected.
For example, a practice might choose patient satisfaction as the quality target. A pool of 5 percent of net income could be created (or withheld) and distributed back to physicians who achieve targeted goals: 2.5 percent for patient satisfaction scores and 2.5 percent for meeting productivity targets. Patient satisfaction could include a number of patient care measures such as the number of referrals, inpatient admissions, length of stay, ancillary services, patient panel size and patient satisfaction survey results.
Here, it might pay to work with several payers over a period of time to establish a physician compensation methodology based on attaining aligned quality metrics. 

Keep the Data Transparent

It’s critical that the data being used to allocate compensation is perceived as relevant — and reliable — by physicians. Use the practice’s own data, not data from a payer or outside source. Then, ensure that data used is both transparent and accessible so that physicians can easily project their income for the year.

Start Small

Consider “shadowing” any changes to the compensation model for a year. A delayed implementation allows for glitches to be discovered and corrective changes implemented. Physicians then would have an opportunity to understand and adjust their practice style and methods to the new quality incentive methodology before implementation.
Ultimately, healthcare reimbursement is moving slowly but inevitably from paying for volume to rewarding value. Savvy practices are beginning to adjust their physician compensation methods now to ensure economic viability down the road in the brave new world of value-based payment.
Our accounting professionals are uniquely qualified to help with the financial modeling and guidance you need you to incorporate quality measures into your physician comp plan. Contact us if you would like us to assist you.

First in a Series

As healthcare reform inevitably moves forward, the concept of value-based care is one that physicians cannot afford to ignore. 

At its core, value-based care focuses on rewarding good work rather than good workloads. It represents a wholesale shift by the federal government and private payers from paying for procedures and volume, to paying for outcomes and value. 

The Times They Are A-Changing

What is driving the evolution to value-based care? In essence, employers, health plans and the federal government have expressed serious concerns related to:

– Perceptions of unsustainable costs
– Recognition that fee-for-service drives volume, not value
– Awareness of the potential for savings
– Current poor performance on quality indicators 

These stakeholders have a desire for more value for the money spent. 

Value-based care utilizes new payment models to reward better results in terms of cost, quality and outcome measures. These new payment methodologies include:

Accountable Care Organizations — The Affordable Care Act included a Medicare provision that allows healthcare providers to participate in accountable care organizations (ACOs). Utilizing shared savings/risk models, ACOs are incentivized to enhance quality, improve beneficiary outcomes and increase the value of care for a defined population across a broad scope of services.

Bundled Payments — Value-based care also seeks to incentivize coordination of care through bundled payments. For example, a cardiology group may partner with its local hospital to ensure coordinated care for patients admitted for angioplasty. The relationship might involve the hospital, the hospitalist, the discharge nurse, the cardiologist and even the primary care physician. A single payment is divvied up among the providers, with positive outcomes rewarded and negative ones penalized (legislation reduces Medicare payments for potentially preventable hospital readmissions).

Outcomes-based Reimbursement — This pay-for-performance financial model links a portion of a provider’s revenue to a quantifiable performance standard that reflects process or outcome criteria.

Patient Center Medical Home —In this financial model, a group of primary care providers agree to accept responsibility for managing the health of and delivering services to a defined population for a per-patient payment.

Get Ready for the Age of “Show-Me Medicine”

Another component of value-based care is what pundits are calling “show-me medicine.” Healthcare providers will increasingly be incentivized to track outcomes and quality metrics and, at some point, will be penalized for not participating in quality reporting programs (e.g., Medicare’s Physician Quality Reporting Initiative). Ultimately, payers will reward positive outcomes and adherence to best practices. 

Moving Forward

It is estimated that 50 percent of physician compensation in the next 10 years will be value-based. As that happens, physicians will certainly face new issues and opportunities. 

Opportunities will arise because physicians are so integral to health care delivery and health care stakeholders will be concerned with physician success in a value-based world. As a result, physicians will have critical choices to consider. They will want to work with healthcare partners that fully and fairly enable an equitable approach to compensation. Equally attractive to physicians will be hospitals and health systems that provide clinical and business resources that promote effective collaboration — everything from care coordination and patient engagement tools to predictive models for health outcomes. 


Value-based care is a complex issue requiring careful analysis of its potential impact on physician practices. Please look for our continuing blog articles on this topic.